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US Treasury Removes India From Its Currency Monitoring List

The US Department of Treasury removed India along with Italy, Mexico, Thailand and Vietnam from its Currency Monitoring List. China, Japan, Korea, Germany, Malaysia, Singapore, and Taiwan are the seven economies that are a part of the current monitoring list, the Department of Treasury said in its biannual report to the Congress.

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What The Report Pointed:

China’s failure to publish foreign exchange intervention and broader lack of transparency around key features of its exchange rate mechanism makes it an outlier among major economies and warrants Treasury’s close monitoring, said the report.

The countries that have been removed from the list have met only one out of three criteria for two consecutive reports, it said.

Surprisingly, Switzerland once again exceeded the thresholds for all three criteria, which is a parameter for being labelled as a “Currency Manipulator”.

But the term was not used by the Report and the Treasury Department maintained that there is not enough evidence to use the label for Switzerland. The Treasury will continue its enhanced bilateral engagement with Switzerland, which commenced in early 2021, to discuss the Swiss authorities’ policy options to address the underlying causes of its external imbalances, a media note said.

About India: The Timing:

The move came on a day when Secretary of the Treasury Janet Yellen visited New Delhi and held talks with Finance Minister Nirmala Sitharaman. On her first visit to India, United States Treasury Secretary Janet Yellen quoted President Joe Biden, saying that India is an “indispensable partner to the United States”. India had been on the list for the last two years.

“That’s particularly true today. I believe that these urgent challenges are bringing India and the United States closer together than ever before,” she said.

Speaking at the US-India Businesses and investment Opportunities event in New Delhi, Janet Yellen said that the US will be extending support to India’s presidency in G20 to achieve shared global priorities.

Currency Manipulators:

    • This is a label given by the US government to countries it feels are engaging in “unfair currency practices” by deliberately devaluing their currency against the dollar.
    • The practice would mean that the country in question is artificially lowering the value of its currency to gain an unfair advantage over others.
    • This is because the devaluation would reduce the cost of exports from that country and artificially show a reduction in trade deficits as a result.

Currency Manipulator Watch List:

    • The US Department of Treasury releases the semi-annual report where it has to track developments in international economies and inspect foreign exchange rates.
      • It reviews currency practices of the US’ 20 biggest trading partners.

Criteria To Determine Currency Manipulators:

    • An economy meeting two of the three criteria in the Trade Facilitation and Trade Enforcement Act of 2015 is placed on the Watch List. This includes:
      • “significant” bilateral trade surplus with the US — one that is at least USD 20 billion over a 12-month period.
      • A material current account surplus equivalent to at least 2% of Gross Domestic Product (GDP) over a 12-month period.
      • “Persistent”, one-sided intervention — when net purchases of foreign currency totalling at least 2% of the country’s GDP over a 12 month period are conducted repeatedly, in at least six out of 12 months.
    • Countries that meet all three of the criteria are labeled as currency manipulators by the Treasury.

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